A firm produces according to the following production function: Q = K^0.25L^0.5 . Suppose that the price of K is $4 per unit, and the price of L is $6 per unit. When L=5 and K=10, is the firm minimizing costs?

No, the least cost combination of inputs (LCCI) produces LCCI labor = 0.066 LCCI capital = 0.025 Use more labor or less capital

2. A firm produces according to the following production function: Q = K^0.33L^0.5. Suppose that the price of K is $6 per unit, and the price of L is $12.5 per unit. When L=15 and K=13, is the firm minimizing costs?

No, the least cost combination of inputs (LCCI) produces LCCI labor = 0.024 LCCI capital = 0.038 Use more capital or less labor

Answer rating: 100% (QA)

Answer In both scenarios the firm is not minimizing costs because the input combination u... View the full answer